Opening Online Savings and CD accounts is Winning Strategy, but Am I Killing My Credit rating

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I've recently stepped up my opening of online bank accounts, but now I am getting concerned that while the process makes sense to keep my savings growing, I may be killing my credit rating.

Some time ago, I opened online accounts with EverBank, HSBC and ING.  Since opening these accounts, I have purchased and sold real estate and gained loans without any problem.

Last summer, as rates began to fall, I opened CDs between 1 year and 18 months with IndyMac, Chase, Amtrust, Corus and ELoan, using BestCashCow.com as my guide.  I don't regret any of these moves as it enabled me to keep some of my cash growing through this difficult low interest rate period. (I am not sure that CDs make too much sense today as rates have come down).

Like many, I am now struggling to figure out what to do with all of the cash that I have lying around as a result of selling Treasuries and seeing my agency bonds be called.  My choice is clear - leave these monies in money market funds earning around 2% and likely to fall or move them into higher yielding online accounts (the risk being that the rate falls dramatically and quickly and that I am just wasting my time).  I recently opened accounts in the amount of $250,000 with the four leading savings rate accounts on BestCashCow.com (all earning between 4% and 3.5%).  I intend to close these accounts, or at least reduce the balances before December 31, 2009, unless FDIC insurance limits remain at $250,000 (I'll close them more quickly if the rates fall dramatically).   I figure that, if the rates do not fall (or fall by the same amount as money market funds) these four accounts will enable me to earn somewhere between an additional $15,000 and $20,000 on this $1 million that I would otherwise not make if I were to just keep my money in the money markey market funds. 

I've thought about continuing down the list and opening a couple of more savings accounts with some other banks in the 3 to 3.5% savings range, but suddenly I am starting to get nervous about what I do not understand.  It is the following - when credit rating agencies see this history of all of these banks pulling my credit information in a very short period of time, are they likely to get scared, and am I likely to find myself trying to explain the reason to some guy in India in vain when I next need a loan to buy a house?

Any thoughts or information on this would be helpful.


Wachovia Way2Save Savings Account Program Pays 5% APY and Provides Up to $300 Bonus

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Wachovia's Way2Save program provides users with a 5% APY return on cash deposited into a savings account as well as a bonus of up to $300 dollars.

Wachovia's Way2Save program provides users with a 5% APY return on cash deposited into a savings account as well as a bonus of up to $300 dollars.  That's pretty good.  Sounds too good to be true, right?  There is no catch but the program has some unique characteristics that won't appeal to everyone.

To participate in the program, you need to open a checking account and then a Way2Save savings accounts.  Both of these accounts are free so there is no problem there. 

Once you open the account, you can fund it in one of two ways.

  • $1 transfer from your checking account to your Way2Save account for each Check Card and electronic payment transaction.  That is, every time you make a debit card transaction or pay a bill online, they will transfer a $1 from your linked checking account to your savings account.  That means you have to have money in your checking account to transfer.  The program is trying to automate your savings by matching the money you spend with $1 saved.  Clever.   
  • Recurring automatic transfer from your checking account to your Way2Save account, $100 maximum per calendar month.  So the maximum you can directly deposit per month is $100, for a total annual amount of $1,200.

Interest Rate

The interest rate you ean on this money is currently pegged at 5% APY the first 12 months and then drops down to 2% APY for years 2 and 3.  The rate is variable meaning it can be changed at any time.

Savings Bonus

Wachovia will also pay a bonus on the balance in the account at the end of each 12 month period.  This bonus is:

Year 1
5% of the eligible balance,
up to $300

Year 2
2% of the eligible balance,
up to $300

Year 3
2% of the eligible balance,
up to $300

 So, if you manage to put $2,000 in the account between periodic transfers and $1 transaction transfers, Wachovia would provide a bonus of $100 at the end of the Year 1.  You'd need $6000 in the account to receive the $300 maximum.  That's 67 debit or bill pay transactions per month.  It's a lot but I know people who do that many.

If you do have the level of activity, you can receive a 5% bonus from Wachovia and potentially receive 5% APY.  In addition, it forces you to put some money away.  That's not a bad program.

Thanks to BankVibe for pointing out the program.


Fed Cuts Rates to 0% But Still Some Savings and CD Rates at 4%+

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The Fed cut its Fed Funds rate to 0-.25% last week but there are still some very attractive savings and CD rates. Get them before they are gone.

The Fed cut its Fed Funds rate to 0-.25% yesterday but there are still some very attractive savings and CD rates.  Get them before they are gone.

These rates include:

  • EverBank is offering a checking account with a guaranteed 3 month bonus rate of 4% APY and a first year APY of 3.42%.  In addition, BestCashCow readers receive $40 when they open the account using this link and fund the account with $40,000 or more.  In one sense, the 3 month bonus is like a liquid 3 month CD.  At 4% APY it would be the highest rate by over 70 basis points.  Another bonus of Everbank, they were one of only a handful of banks that actually saw their Bauer rating for financial stability and solvency increase over the last quarter.  Everbank has told us that the rate will only last through the year.  They will be lowering rates in January.
  • A five year CD from Chase/WaMu paying 5% APY.

There are many other savings, money market, and CD accounts that are paying well above the national averages.

Rates are falling and banks have indicated to us that they will fall further over upcoming days and weeks.  But as chart below shows, savings and CD rates have held up incredibly well despite several rounds of Fed rate cuts.  Why?  Because there is competition for your money and banks needs your deposits to fund their operations and stay solvent.

CDandSavingsRateAnalysis-12/17/2008

 We expect rates to fall but if this trend holds anticipate top savings, money market and CD rates will not approach 0%, but rather come down to the 3-4% range.  Still, if you have money that you want to invest in an FDIC insured account, now is a good time to look into opening an account.